This study explores literacy practices among the Peruvian rural population in the Amazon, and the relationships of these with literacy practices in the multigrade school. The conceptual framework for the study draws on a perspective of literacy as a social practice whereby literacy is seen as a highly contextualised practice, related to the uses that different social groups have for it, and shaped by history, culture and power relationships that permeate each group. The study therefore focuses not only on the multigrade school but also on literacy practices in different domains in the life of rural children: the community, the home and the multigrade school. Through an ethnographic approach, the case study examines rural children's immediate environment, and the meanings and uses that literacy has for their communities and families. These values and expectations of literacy are not confined to the local context but examined in relation to regional and national contexts and to the particularities of Peruvian society and history. The arrival of literacy within the colonial enterprise in XVI century, the limited access to literacy for rural population, the progressive expansion of schooling during XX century and the current uses of literacy are examined as aspects of the historical and current context that shape what literacy means today for rural populations. In order to explore the practical possibilities to improve literacy learning in school, an action research-based intervention was conducted with teachers in the case study school. It demonstrates the possibilities and also the constraints for improving literacy learning and for using action research as an instrument for fostering teachers' professional development. The research findings indicate a complex relationship between literacy practices in different domains, including the multigrade school. They also demonstrate the social character of literacy practices and their embeddedness in power structures, social relations and identities. While there are clear discontinuities between domains, there are also coincidences and continuities across domains that have implications for literacy learning in the multigrade school.